Law Firm Financing Options - Sunwest Bank
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Law Firm Financing Options

Financing and Loan Options
for Law Firms

As a law firm, it is essential to partner with a bank that understands the unique financial challenges and cash flow issues you face as a legal professional. Our Legal Specialty Banking Group has comprehensive experience supporting local and regional legal firms and their partners to meet their financial goals. We can help your legal practice manage short- and long-term financial needs.

Our bankers take a detail-oriented approach to getting to know you and understand how you do business and your needs and goals. Whether you need to finance income leveling for new partners, cover operating expenses while waiting for a case to close, or move to a new office, we can create solutions tailored just for you.

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Law Firm Financing Options

Law firms have distinct financial needs due to the nature of legal work. Financing helps firms cover operating expenses while awaiting payment on services, pay for growth initiatives, and manage irregular cash flows. Here are financing options commonly used by legal firms:

Business Lines of Credit

Revolving credit to cover short-term working capital needs and easy access to funds.

Term Loans

Longer-term loans for significant investments and expansions.

Accounts Receivable Financing

Funding secured by unpaid client invoices.

Litigation Funding

Funding for case costs in exchange for a share of judgment/settlement.

SBA Loans

Government-guaranteed small business loans with favorable rates and terms.

Merchant Cash Advances

An advance on future credit card receivables.

Law Firm Loans

Specialty financing tailored to the legal industry.

Business Credit Cards

Cards for managing firm expenses and cash flow.

Line of Credit

A business line of credit provides flexible access to working capital that can be used to cover short-term needs. Legal firms can tap lines of credit to fund operating expenses and smooth out irregular cash flows before client invoices are paid.

Lines of credit allow firms to borrow up to a pre-set limit, then repay and re-borrow as needed. Interest is only charged on the outstanding balance, not the total limit. A line of credit is usually quick and easy to access once established.

Term Loans

Term loans provide lump-sum financing that law firms can use to fund investments like new office space, staff expansions, equipment purchases, renovations, and other business needs. Term loans have predictable fixed monthly payments over a set period, usually at least 1-3 years.

The lump sum provided by a term loan allows firms to finance major operational and strategic initiatives to grow and scale their practices. Term loans can also refinance existing debt at more favorable rates.

Accounts Receivable Financing

Accounts receivable financing, or invoice factoring, allows law firms to borrow against unpaid client invoices. The lender advances a percentage of the outstanding invoices, with the balance paid minus fees after the client pays in full. This immediate funding helps firms bridge cash flow gaps between providing services and getting paid.

Receivables financing can also assist firms in managing financial commitments during growth periods. The steady cash flow from business financing allows firms to meet payroll, cover overhead, and take on new cases without tapping partners’ capital. Receivables financing aligns repayment with client payments, avoiding fixed loan payments.

Litigation Funding

Litigation funding provides financing to firms to cover case costs in exchange for a percentage of the judgment or settlement. This allows firms to take on contingency fee cases without carrying all costs until the case concludes. The cash infusion also enables firms to expand litigation services.

Litigation financiers conduct due diligence on case merits and likely outcomes. Qualified cases can receive funding for legal fees, expert witnesses, discovery, court filings, and other litigation costs. The financing is repaid only if the case succeeds—litigation funding shifts risk from the law practice to the financing partner.

SBA Loans

The U.S. Small Business Administration (SBA) guarantees loans from approved lenders, like Sunwest Bank, to qualifying small businesses. The SBA guarantee encourages lenders to provide favorable loan terms. A small business loan can help legal practices access affordable, long-term financing.

Standard SBA loans for legal firms include:

  • SBA 7(a) – Up to $5 million for general business purposes
  • SBA 504 – For significant fixed assets like real estate
  • SBA Express – Fast turnaround microloans up to $350K

SBA loans have lower down payments, lower rates, and longer repayment terms than conventional bank loans. The application process is extensive, but SBA loans provide excellent financing for eligible law firms.

Merchant Cash Advances

A merchant cash advance provides an upfront lump sum in exchange for a percentage of future credit card and debit card sales. Daily or weekly repayments come from a percentage of charge volume until the advance is repaid.

Merchant cash advances allow firms to quickly access funds and offer easy approvals for newer and cash-strapped firms. However, the repayment amounts are variable, and the equivalent interest rates are high. Merchant cash advances are not actual loans but should be used cautiously.

Law Firm Loans

Specialized loans for law firms are designed to address legal professionals’ unique financial needs and challenges. These loans can be used for various purposes, including expanding your practice, hiring new staff, investing in technology, or handling case-related expenses. Unlike generic business loans, law firm loans are tailored to accommodate the irregular cash flow and unique billing cycles of legal practices. They often come with flexible repayment options, allowing law firms to repay the loan as they receive client payments. This type of financing is ideal for firms looking to grow and invest in their future without straining their current financial resources.

Business Credit Cards

Business credit cards help firms smoothly manage business expenses and cash flow. Cards provide benefits like:

  • Generous rewards and points on everyday law firm purchases
  • Employee cards with spending limits
  • 0% intro APRs on purchases
  • Extended float periods before interest accrues

Putting expenses on credit cards preserves cash availability while building credit. However, balances should be paid off each month to avoid paying interest.

Getting a Law Firm Loan or Financing

What Lenders Look For

Lenders review specific criteria when considering financing for law firms:

  • Time in business and firm history
  • Revenues, profitability, and growth
  • Key partners and their credentials
  • Accounts receivable size and collectability
  • Case types, risk factors, and contingencies
  • Malpractice coverage and claims history
  • Credit scores of the firm and its partners
  • Existing debts and liabilities

Having detailed financial records will facilitate the lending process. Be ready to provide tax returns, financial statements, partner agreements, receivables reports, and case funding requirements. Highlighting steady revenues and patient receivables shows the firm is a reasonable credit risk.

Tips for Securing Law Firm Financing

  • Seek an understanding of the legal industry – Work with specialty lenders familiar with the legal industry over general commercial banks.
  • Check partner creditworthiness – Partners may need to guarantee loans personally.
  • Forecast cash needs – Detail funding needs for operations, growth, and contingency reserves.
  • Negotiate favorable billing terms – Try to get faster client payment schedules.
  • Offer accounts receivable or case proceeds as collateral – This lowers lender risk.
  • Explore SBA loans if eligible – The SBA guarantee provides advantages.
  • Be conservative with loans – Don’t take on excessive debt obligations.
Alternative Fee Arrangements and Financing

Alternative Fee Arrangements and Financing

To improve cash flow, firms are transitioning from hourly billing to value-based pricing models such as:

  • Flat fee agreements – Paid upfront for defined services
  • Phased billing – Payments tied to case milestones
  • Contingency fees – Firm paid percentage of judgment/settlement
  • Subscription models – Recurring retainer for on-demand services
  • Collar arrangements – Fees capped at an agreed ceiling

These models provide more predictable income streams to facilitate financing. Firms can also explore litigation financing and client cash advances to fund cases billed on contingency or other alternative arrangements.

Law Firm Financing Experts

Law Firm Financing and Services from Sunwest Bank
Sunwest Bank has extensive expertise in assisting firms with financing, treasury services, and other banking needs. We offer:

Law Firm Loans

We understand the nuances of legal industry cash flow. Our loans for law firms provide access to capital for smoother operations and strategic investments while awaiting client payments.

Lines of Credit

Our business lines of credit for firms provide flexible financing that can be accessed to cover costs during irregular income periods. We can structure accessible borrowing limits that align with your revenue cycles.

Treasury Management

From lockbox services to consolidated firm-wide reporting, our treasury management solutions provide visibility into receivables and smooth cash management for law practices.

SBA Loans

As a Small Business Administration Preferred Lender, we efficiently process SBA-guaranteed loan applications and provide long-term financing to small business owners at competitive rates.

Commercial Real Estate Loans

When your firm needs to purchase or renovate office space, we offer tailored commercial real estate loans, including SBA 504 loans with low down payments.

Let Sunwest Bank help address your law firm’s unique banking and financing needs. Contact us today to learn more.

Sharyn Kohara


Vice President & Relationship Manager
Specialty Banking


Contact Sunwest Bank

Frequently Asked Questions

How do law firms raise money?

Law firms raise money in several ways: Profits from legal services provide operating income. Bringing in new partners or lateral hires expands equity capital. Lines of credit and law firm loans can provide debt financing. Some firms merge to access capital and scale. Receivables financing monetizes unpaid invoices. Litigation financing funds case costs. Selling ancillary services like title processing generates non-legal revenues. Rental income from subleasing space provides cash inflows.

How many bank accounts should a law firm have?

Most firms utilize 2-5 bank accounts: An operating account to manage cash inflows/outflows, an IOLTA account to hold client funds, separate accounts for firm credit cards and lines of credit, a trust account for processing settlements, and an account for partnership capital. The number of accounts depends on the law firm’s financing options, size, and complexity. Too many accounts create administrative burdens. However, segmenting funds responsibly shows financial stewardship and supports transparency.

How much capital should a law firm have?

There is no set formula, but law firms generally benefit from having at least 3-6 months of operating expenses in reserve capital, additional funds to cover partner draws, expected case expenses, and other near-term cash needs. Conservative capitalization protects against cash flow fluctuations and provides stability. However, excess idle capital represents missed investment opportunities. Finding the right balance depends on cash flow patterns, risk tolerance, and financing contingencies.

Is it hard to get an SBA business loan?

Getting approved for an SBA loan may be more challenging than conventional financing, but it has significant advantages. The documentation requirements and eligibility standards mean extra work upfront. Loan processing can also take longer. However, SBA loans provide affordable rates, long repayment terms, and more significant loan amounts than many small businesses could obtain otherwise. Working with an experienced SBA lender streamlines the process. For qualified applicants, SBA loans are very beneficial.

What is a lawyer's bank account called?

Lawyers’ bank accounts holding client funds in trust are commonly called IOLTA or IOLA accounts. IOLTA stands for Interest on Lawyers’ Trust Accounts. Beyond IOLTAs, law firms also typically have operating bank accounts, payroll accounts, credit card processing accounts, partnership capital reserve accounts, and other bank accounts required for smooth financial management and transparency.

What is firm financing?

Law firm financing refers to external law firm funding provided to practices to support operations, cash flow, and investments. Lines of credit, loans for law firms, receivables financing, SBA loans, and litigation funding are all examples of law firm financing. This capital helps firms bridge income gaps, fund expansions, cover case costs, and manage irregular receivables cycles caused by prolonged, contingent cases. Finding the right financing allows firms to run smoothly and pursue growth opportunities.

What is the easiest SBA loan to get?

The SBA Express loan offers the fastest and easiest path to securing SBA financing. The streamlined application and accelerated underwriting process typically facilitate funding within 36 hours. SBA Express loans are limited to $350,000 and 50% guaranteed by the SBA. The simplified documentation, quick turnaround, and low 7(a) program guarantee make Express loans accessible to qualified borrowers. Other SBA loans allow for more funding but require lengthier processes.

What is legal finance?

Legal finance refers to financial services and capital arrangements tailored to the legal industry and law firms. Litigation financing funds lawsuit costs in exchange for a case proceeds share. Law firm loans and lines of credit provide access to operating capital. Receivables factoring turns unpaid invoices into immediate cash. Consulting helps firms with financial benchmarking, budgeting, and profit optimization. Legal finance allows firms and attorneys to fund operations, smooth cash flows, and concentrate on delivering excellent legal services.